Behind the Scenes of Gift Card Security: Leveraging Advanced Technologies and Industry Collaborations to Protect Prepaid Products

When strolling the aisles of retail stores, gift cards present an inviting value proposition. And yet, the security of these financial products is paramount and a key focus for the entire industry. Which begs the question: What makes a secure gift card?

Gift card packaging understandably takes the spotlight whenever the gift card industry discusses fraud prevention. After all, packaging is the most visible layer of security — the first thing retail employees and customers see when they pick a card off the shelf. However, while packaging is an essential line of defense, it's only the tip of the iceberg.

A comprehensive fraud prevention strategy must complement physical security with innovative technology and real-time monitoring — and, importantly, be bolstered by gift card brands, program managers and retailers collaborating to support industrywide solutions.

Deploying End-to-End Tools and Processes to Ensure Greatest Protection

One can see with their own eyes how packaging features help protect a gift card before purchase. Advanced packaging technologies provide physical security that deters alterations and helps consumers and retail employees identify signs of tampering. However, relying solely on packaging to prevent fraud isn't enough. It is akin to locking the front door while leaving windows wide open.

To keep the “house” secure, there's a tremendous amount going on behind the scenes. Strong back-end controls, geolocation technologies and real-time 24/7 monitoring provide overlapping layers of defense, all of which support and reinforce the protection offered by card packaging. These systems track activity and card activations at the point of sale, as well as redemptions. By applying multiple tools and systems at each stage of the life cycle, program managers can detect unusual activity and take steps to stop it.

The Path Forward: Proactive Collaboration and Innovation

Fraud teams constantly innovate to ensure these controls, technologies and monitoring systems are effective as possible to combat evolving threats. These efforts are most effective when brand partners, merchants and law enforcement work together to help ensure the industry as a whole can quickly react to anomalies, flag potential patterns, and coordinate responses.

The value of partnerships in deploying fraud prevention programs is even more clear when you consider the constantly changing techniques that fraudsters employ. In some cases, fraud activity has become quite sophisticated, driven by connections to larger organized crime networks. As fraudsters share insights with each other, so should brands, merchants and other industry participants.

This is where industry associations, such as the Innovative Payments Association (IPA), come into play. Groups like the IPA have resources to connect brands and merchants with industry experts and law enforcement representatives. These connections enable every part of the pre-paid card industry to share information, understand recent trends and evolving threats, and ultimately work together to protect consumers.

Associations can provide resources for brands and merchants to navigate regulatory compliance, and they also host fraud prevention summits to help attendees understand new tools, best practices and resources to address unique challenges. These events serve as opportunities to connect with partners such as law enforcement professionals. Collaboration with law enforcement is essential to supporting merchants' efforts in prosecuting those who are responsible for fraud.

Preserving Gift Cards’ Value Proposition

At their core, gift cards represent a simple but compelling value proposition, offering accessibility, transferability, and ease of use. This is why hundreds of millions of gift cards, representing billions of dollars in value, are acquired every year by consumers of all types — from families sharing gifts during the holidays, to unbanked individuals and those who seek alternatives to traditional credit cards.

Keeping that value proposition intact requires all of us across the gift card ecosystem to play our part and work together in fraud prevention. We have substantial grounds for optimism. New technological features and processes by card developers have been shown to reduce attack rates and losses following deployment at retailers. As gift card protections continue to evolve beyond the visible features seen on card packaging, businesses and consumers should avail themselves of the opportunities to learn more about fraud prevention. There are a wide range of resources available, including the IPA’s Safe Shopping site, InComm Payments’ Fraud Protection web center, and the Federal Trade Commission’s (FTC) gift card scam prevention tips.

By working together, we can be more successful across the gift card life cycle in combatting fraud and preserving the unique benefits of gift cards for all.

Rob Hadden is senior vice president of fraud ops at InComm Payments, a global payments technology company.

Brian Tate is CEO of the Innovative Payments Association, a trade organization that is the leading voice of electronic payments for consumers, businesses, and governments at all levels.